Blockchain Vocabulary

Blockchain is a relatively new term used to describe a series of distributed databases that act as a tamper-proof, verifiable ledger. As with any new technology, blockchain has its own terminology. Below is a list of some of the most important vocabulary.

Address

Addresses (Cryptocurrency addresses) are used to receive and send transactions on the network. An address is a string of alphanumeric characters, but can also be represented as a scannable QR code.

Agreement Ledger

An agreement ledger is distributed ledger used by two or more parties to negotiate and reach agreement.

Attestation Ledger

A distributed ledger providing a durable record of agreements, commitments or statements, providing evidence (attestation) that these agreements, commitments or statements were made.

ASIC

ASIC is an acronym for "Application Specific Integrated Circuit.” ASICs are silicon chips specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.

Bitcoin (uppercase)

The well known cryptocurrency, based on the proof-of-work blockchain.

bitcoin (lowercase)

The specific collection of technologies used by Bitcoin’s ledger, a particular solution. Note that the currency is itself one of these technologies, as it provides the miners with the incentive to mine.

Blockchain

A blockchain is a type of distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks (rather like collating them on to a single sheet of paper). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows blockchains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions.

Block Height

Block height refers to the number of blocks connected together in the blockchain. For example, Height 0 would be the very first block, which is also called the Genesis Block.

Block Reward

The reward given to a miner which has successfully hashed a transaction block. Block rewards can be a mixture of coins and transaction fees, depending on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined. The current block reward for the Bitcoin network is 25 bitcoins for each block.

Central Ledger

A central ledger refers to a ledger maintained by a central agency.

Confirmation

A confirmation means that the blockchain transaction has been verified by the network. This happens through a process known as mining, in a proof-of-work system (e.g. Bitcoin). Once a transaction is confirmed, it cannot be reversed or double spent. The more confirmations a transaction has, the harder it becomes to perform a double spend attack.

Consensus Process

The process a group of peers responsible for maintaining a distributed ledger use to reach consensus on the ledger’s contents.

Consensus Point

A point – either in time, or defined in terms of a set number or volume of records to be added to the ledger – where peers meet to agree the state of the ledger.

Cryptocurrency

A form of digital currency based on mathematics, where encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Furthermore, cryptocurrencies operate independently of a central bank.

Digital Commodity

A digital commodity is a scarce, electronically transferrable intangible, with a market value.

Digital Identity

A digital identity is an online or networked identity adopted or claimed in cyberspace by an individual, organization or electronic device.

Distributed Ledger

A distributed ledger is a type of database that is spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger. Distributed ledger data can be either "permissioned" or "unpermissioned" to control who can view it.

Difficulty

Difficulty, in Proof-of-Work mining, is how hard it is to verify blocks in a blockchain network.

Double Spend

Double spend refers to a scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recipients at the same time. However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.

Genesis Block

The very first block in a block chain.

Ledger

An append-only record store, where records are immutable and may hold more general information than financial records.

Mining

The process by which transactions are verified and added to a blockchain. This process of solving cryptographic problems using computing hardware also triggers the release of cryptocurrencies.

Multi Signature

Multi-signature (multisig) addresses allow multiple parties to require more than one key to authorize a transaction. The needed number of signatures is agreed at the creation of the address. Multi signature addresses have a much greater resistance to theft.

P2P

Peer-to-peer (P2P) refers to the decentralized interactions that happen between at least two parties in a highly interconnected network. P2P participants deal directly with each other through a single mediation point.

Participant

An actor who can access the ledger: read records or add records to.

Peer

An actor that shares responsibility for maintaining the identity and integrity of the ledger.

Permissioned Ledger

A permissioned ledger is a ledger where actors must have permission to access the ledger. Permissioned ledgers may have one or many owners. When a new record is added, the ledger’s integrity is checked by a limited consensus process. This is carried out by trusted actors — government departments or banks, for example — which makes maintaining a shared record much simpler that the consensus process used by unpermissioned ledgers. Permissioned blockchains provide highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties. A permissioned ledger is usually faster than an unpermissioned ledger.

Proof-of-Work

A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.

Ripple

A payment network built on distributed ledgers that can be used to transfer any currency. The network consists of payment nodes and gateways operated by authorities. Payments are made using a series of IOUs, and the network is based on trust relationships.

Replicated Ledger

A ledger with one master (authoritative) copy of the data, and many slave (non-authoritative) copies.

Scrypt

An alternative proof of work system to SHA-256, designed to be particularly friendly to CPU and GPU miners, while offering little advantage to ASIC miners.

Smart Contracts

Smart contracts are contracts whose terms are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.

Tokenless Ledger

A tokenless ledger refers to a distributed ledger that doesn’t require a native currency to operate.

Unpermissioned Ledgers

Unpermissioned ledgers such as Bitcoin have no single owner — indeed, they cannot be owned. The purpose of an unpermissioned ledger is to allow anyone to contribute data to the ledger and for everyone in possession of the ledger to have identical copies. This creates censorship resistance, which means that no actor can prevent a transaction from being added to the ledger. Participants maintain the integrity of the ledger by reaching a consensus about its state